The coming data crunch

Over the past few years, the carriers in the USA have been steadily changing their pricing plans, offering lower and lower data caps for a slightly lower monthly fees, and getting rid of unlimited and higher capped plans.

The majority response to these changes are favorable, as the majority of people look at their current monthly utilization, see that they are currently below the lower, cheaper cap, and lock in to that plan. They feel like they are saving money. Any they are locked in so they feel they will continue to save money.

The truth is that this majority is acting in the most blitheringly stupid idiotic way possible. They are allowing the carriers to bribe them now into smaller capped plans so that they can be royally fleeced by the same carriers later.

How? This majority has no idea how quickly their bandwidth use is growing and how this growth is accelerating. And they have no idea how much the carriers do charge when they go over. It’s like the the overage interest charged on credit cards. Get card, pay it off, save money. Go one day over and suddenly you are paying 26% compounding interest and getting hammered.

The majority assumes there will be a way out when they hit the carrier limits. They are wrong. Here’s how.

The myth of choice.

Back five or ten years ago, US households had a multitude of choices for broadband internet, these days, it’s no longer true. According to the FCC via the Washington Post, 78% of US households have a choice of only two providers, 13% can only use 1 provider. So really no choice.

With cable, its even worse. If the National Broadband Plan comes into play, then up to 15% of households will gain choice in cable providers (FIOS fiber is included as cable), the remaining 85% will still have no choice (see the NYT article here). Word is that currently only 2% of households currently have a choice in cable provider. 2%! I know! 98% have no choice!

Which means that the cable providers (who are the broadband providers) own a monopoly on 98% of US households. If you want cable TV, if you want fast internet, you can only use one provider and whatever plans they offer. Since there is no competition for your household, the carrier who has the monopoly over you has absolutely no interest in providing competitive services or pricing. If you don’t like the plans offered, you don’t get TV or internet. At all! No choice.

What about satellite? If you want TV and slow internet on sunny days, and only if your landlord allows dishes, it may be an option. Until you see their capped plans are even smaller. And ADSL? The ADSL providers are going out of business because the line sharing law, which they relied on, was reversed in 2005.

There exists an organization called the FCC. It’s part of the government and its job is protect consumers from monopolistic and unfair practices by communications carriers, like cable TV, phone and ISP's. Turns out, lobbying by these carriers over the past few years (and the hiring of ex FCC commissioners by them for fat salaries) has led to a situation where the mandated government organization, the FCC, no longer has the jurisdiction or claws to monitor or regulate this industry, and therefore protect us consumers.

It is a myth that the average consumer has a choice in how they access the internet and in the plans that can get.

The myth of unlimited

Riddle me this. What is the cap on your home broadband internet connection? Its unlimited right? Do you know? Can you even find out? I bet not. I signed up for an unlimited plan on my home internet (both providers), yet they both manage an unlimited plan as a plan which they arbitrarily throttle and cap. So its not unlimited! Its capped! The cap itself is whatever they want it to be, and they don’t say what that cap is. What happens when the consumer hits this unknown cap? They get cut off. And there is no recourse. No option. No one to switch services to, no plan to upgrade to. No choice.

Those who have the AT&T unlimited data plan on their iPhones know what I am talking about. AT&T throttles or cuts off people using what they say is too much bandwidth on unlimited plans. Again, no one agreed to the cap, no one knows what the cap really is, and AT&T does what it pleases. Don’t like it? Nothing you can do. All the other carriers do the same, at the same price point, at the same unknown and very variable cap.

I smell cahooting. It looks to me like cartel behavior.

It is a myth that unlimited plans are capped, or that they will even exist again in the future.

The myth of static use

If you have gotten this far in the rant, and I’d be surprised if you do, you may be thinking that all this does not matter, your usage of the internet is not even close to the unknown caps on broadband or mobile, so why worry?

Here’s why.

• Five years ago you subscribed to, erhem, magazines and newspapers, no bandwidth used. Today you read all you want on the internet, and your ‘special’ needs (nudge nudge wink wink) are handled via streaming video, lots of bandwidth used.
• Three years ago you phoned your friends to plan a party, no bandwidth used. Today we use Facebook and FourSquare not only to plan, but to post photos afterward, lots of bandwidth used.
• Two years ago, you only got text email on your phone, little bandwidth used. Today, you video chat, use apps, load maps, and run your life on an iPhone, lots of bandwidth used.
• A year ago, you rented DVD’s, no bandwidth used. Today you stream Netflix, lots of bandwidth used.
• Six months ago you watched programs on TV, no bandwidth used. Today you watch shows on YouTube, Hulu and other services, lots of bandwidth used.
• Three months ago you listened to music on an iPod, no bandwidth used. Today we have Pandora and Spotify, lots of bandwidth used.
• Soon (like next month), your phone will download its own updates, replicate into the cloud and update its apps using the internet, using even more bandwidth.

See the trend? Your bandwidth use has doubled or quadrupled year in year out.

The carriers know this.

Project forward, your bandwidth use will double or quadruple annually again. How quickly will you hit the mysterious cap and be forced to pay the insane overage fees, or cut back on services.

The carriers want to make money off this trend. They are relying on apathy and consumer short-sigtedness to lock in a beneficial cap and fee structure for them. And the majority is blitheringly stupidly going along with this.

It is a myth that you won't bump up against your cap soon, whatever the cap is.

Aside: it gets worse

The current plans for LTE on all carriers have an interesting feature. If you use your LTE phone at maximum LTE speed to download something, you will hit the bandwidth cap in about one hour. One! So what do you do for the remaining about 719 hours in the month? You pay overages, expensive overages, or turn off your LTE data. I see the carriers rubbing their hands and drooling over this.

And I bet none of them will offer an upgrade from 3G to LTE for unlimited plan holders.

Data crunch

So while we are all happily watching movies, posting photos, video conferencing and listening to music over the internet, the carriers have circled, and set the trap.

As soon as our usage hits these caps, probably sometime this year, the carriers will make a killing. They will not offer higher caps, they will not offer unlimited plans, they will not offer any choice. Pay them, or piss off.

A data crunch is coming, when need for more data gets crushed by the carriers cap and fee structures. Consumers will get hurt, companies that rely on the internet will get hurt, innovation will be stifled in the USA, and no-one seems to care.

Or maybe I am the only blithering idiot worrying about this.

The hiltmon has left the building.